Article2019

The relationship between environmental disclosure quality and earnings quality: a panel study of an emerging market

Mohammad Alipour · Mehrdad Ghanbari · Babak Jamshidinavid · Ali Asghar Taherabadi

74 citations0/0 files storedJournal of Asia Business Studies

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Corporate Social Responsibility Reporting Auditing, Earnings Management, Governance Corporate Governance and Financial Management

Abstract

Purpose The purpose of this paper is to examine the association between corporate environmental disclosure quality (EDQ) and earnings quality (EQ). Design/methodology/approach The paper uses earnings persistence and accruals quality as a measures of EQ. The paper also uses panel data regression to examine the association between EDQ and EQ for a sample of 107 Iran non-financial firms. Two different theoretical frameworks are used to clarify whether and to what extent an association may exist as an explicit relationship between EDQ and EQ. Findings After controlling for several firm-specific characteristics, the results show that between 2011 and 2016, there has been a significant positive relationship between EDQ and EQ. Practical implications This study sheds light on the relevance of regulating corporate reporting within a setting where companies are already voluntarily reporting on environmental information. Findings have implications for policymakers who have mandated or considering mandating environmental reporting. To the policymakers, in particular, this study highlights the need for incorporating, within the listing rules, minimum requirements in relation to the nature and content of environmental reports. Social implications The findings have implications for stakeholders in terms of effective information quality. The findings are important as more environmentally responsible firms may provide higher quality, more reliable and more transparent information to meet the ethical expectations of stakeholders. Originality/value This is the first study in Iran that considered the impact of EDQ on EQ. This study contributes to the literature on the relationship between EDQ and EQ by showing that the EDQ in Iran is associated with the EQ.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1978Specification Tests in Econometrics 2002Unit root tests in panel data: asymptotic and finite-sample properties 1991The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders 2002The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors 2007Why would corporations behave in socially responsible ways? an institutional theory of corporate social responsibility 2008“Implicit” and “Explicit” CSR: A Conceptual Framework for a Comparative Understanding of Corporate Social Responsibility 2010Understanding earnings quality: A review of the proxies, their determinants and their consequences

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2024Corporate social responsibility ( CSR ) and earnings management: A structured literature review with a focus on contextual factors 2021Corporate social responsibility disclosure and financial reporting quality: Evidence from Gulf Cooperation Council countries 2021Does voluntary CSR disclosure and CSR performance influence earnings management? Empirical evidence from China 2022The Moderating Effects of Corporate Social Responsibility on the Relationship between Creative Accounting Determinants and Financial Reporting Quality

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